Pino v. Bank of New York - Mellon

Supreme Court does not undermine BFP Protections

Last Thursday 2-8-13, the Florida Supreme Court released its opinion in Pino v. Bank of New York. As described below, FLTA and ALTA had filed a joint Amicus brief in this case. The opinion was carefully crafted to address only the question of reopening a case which had been voluntarily dismissed (in this case, after allegations of fraud had been asserted) before any affirmative relief had been granted.

Given the court's understandable frustration with the mortgage crisis and various frauds on the courts, ALTA and FLTA were concerned about the possibility of an overbroad ruling, which might call into question the sanctity of REO outsales. In the opinion, the court specifically stated:

"Although this case arises out of a mortgage foreclosure action, we do not decide broader issues related to mortgage foreclosures in general, such as whether a copy of an assignment of mortgage is necessary to establish standing to foreclose on the mortgage or whether the rights of affected third parties who later purchase foreclosed properties are protected when collateral attacks are brought against otherwise final court proceedings."

While we are pleased with the narrow scope of this opinion, the language above highlights the importance of our efforts in supporting the finality provisions of House Bill 87

Background

FLTA routinely monitors real estate cases being decided by Florida’s appellate courts, and is on the lookout for cases which might adversely affect real estate conveyancing, call into question the certainty of title or otherwise impact our business.

Our initial evaluation was that the Pino v. Bank of New York Case decided by the 4th DCA, while interesting, was not going to impact the title industry. This was a foreclosure case. The Bank of New York - Mellon was originally represented by the David Stern firm. Mr. Pino's counsel asserted that documents filed by the Bank, including the assignment of mortgage, were fraudulent. Rather than responding to Mr. Pino’s discovery requests, the Bank’s attorney filed a voluntary dismissal of the foreclosure action.

Several months later, BoNY filed a new foreclosure action against Mr. Pino along with “new” assignments of the mortgage. Mr. Pino then asked the court to vacate the voluntary dismissal of the first foreclosure action, asserting that the documents filed in that case constituted a fraud on the court. He further asked the court to impose sanctions in the form of dismissal of the case with prejudice (i.e. to prevent the Bank from re-filing a third foreclosure action). Following long-established Florida precedent, both the trial court and the 4th District Court of Appeals (with some reluctance) found they were without jurisdiction to vacate the voluntary dismissal and denied Mr. Pino’s motion. The 4th DCA certified the question to the Florida Supreme Court as a question of great public import.

In FLTA’s first evaluation, we concluded that the certified question DID NOT present a title issue. The question is limited to a voluntary dismissal - -and that leaves everything as if the lawsuit had never been filed. Meaning (in a foreclosure context), a title examiner would still be calling for a satisfaction of the un-foreclosed, outstanding mortgage If the underlying (dismissed) suit was affirmatively trying to establish an interest in the property (an equitable lien for example), either it is of record or not. The title examiner will either call for dealing with the issue (if it is of record), or it can be safely ignored under the Recording statute §695.01.

Under the changes we made a few years ago to the Lis pendens statute §48.23, the LP filed in the dismissed case no longer provides actual or constructive notice – so in a twisted way, all the dismissed suit has done is highlighted the issue and the potential claim making it easier for the title examiner to pick it up. Based on this analysis, we were taking no action with regard to this case.

After the question was certified, the parties settled the case – which would normally be the end of things. But the Florida Supreme Court (S.Ct. Order Here) refused to dismiss the pending case and directed both parties to go to the expense of briefing and fighting the appeal. This is HIGHLY UNUSUAL, and made it apparent that the Supreme Court wanted to make some new law.

The unusual posture of this case raised significant concerns in the industry. Our friends at First American strongly urged us to re-evaluate the significance and potential risks of an expansive ruling in this case. None of the current Supreme Court Justices have a strong transactional real estate law background, so unless they have help from an amicus, they might not fully appreciate the implications of certain holdings.

The title industry perceived a risk that the court (in dicta or otherwise) could try to deal with the robo-signing and fraudulent document problems in a sweeping pronouncement which might also apply to setting aside final judgments of foreclosure. The FLTA board decided that FLTA (later joined by our friends at ALTA because of the national implications of an adverse Florida ruling and the similarity of the Federal Rules of Civil Procedure to Florida’s) should file an amicus brief highlighting the current law’s desirable protection of Bona Fide Purchasers, and the consequences of uncertainty as to when or whether a final judgment can be attacked.

In some (non-judicial) states, that type of uncertainty has frozen up the REO resale market – making them essentially uninsurable. We obviously don’t want that to happen in Florida. If a ruling were to hold that an innocent purchaser of REO property could later be thrown out of property they had acquired either from a courthouse sale or as bank REO, that could cause significant hesitation in insuring those outsales.

First American, Fidelity National Title, Alliant National, WFG and other underwriters very generously agreed to help FLTA cover the costs of engaging former Supreme Court Justice, Board Certified Real Estate Attorney, and all around “Good Guy,” Ken Bell to represent FLTA in preparing and filing our amicus in this case. Judge Bell’s biography can be found here.

The FLTA amicus brief has been filed outlining the industry’s concerns for protecting the interests of Bona Fide Purchasers of post foreclosure properties.

Please join me in thanking First American, Fidelity National Title, Alliant National, WFG and other underwriters for their generous support and continued efforts to protect the sanctity of land title in Florida and all of our agent business and in thanking Ken Bell for his truly masterful work on our brief.